SEC Considers New Disclosure Rule

Neil Roland Bloomberg News, THE JOURNAL RECORD

WASHINGTON -- The U.S. Securities and Exchange Commission may bar
companies from disclosing market-moving information to securities
analysts before they release it to the general public, SEC officials
said.

"Our goal is to figure out a way to level the playing field," SEC
corporation finance director Brian Lane said in an interview. To do
that, the SEC staff may recommend a new selective-disclosure rule or
guidelines to the agency's commissioners following a broader review
of insider-trading regulations, he said.

The staff review, which is likely to take several months,
ratchets
up SEC Chairman Arthur Levitt's effort to coax businesses to
voluntarily stop selective discussions with analysts and
institutional investors that can move stock prices before other
investors get the same information.
In January, for example, General Motors shares rose 3.2 percent
after the world's biggest automaker told an invitation-only meeting
of analysts about plans to raise production of profitable pickups
and
sport-utility vehicles. Last month, Lehman Brothers Holdings shares
rose 6.8 percent after Chairman Richard Fuld told a lunch meeting
with analysts and investors that first-quarter earnings may rise.
Levitt has called selective disclosure "a stain upon our market."
And billionaire investor Warren Buffett, in his annual letter to
Berkshire Hathaway Inc. shareholders Saturday, criticized companies
that "matter-of-factly favor Wall Street analysts and institutional
investors in a variety of ways that often skirt or cross the line of
unfairness."
Some SEC division directors and Commissioner Isaac Hunt said a new
selective-disclosure standard would benefit small investors. "I am
hopeful that we will be able to find a legal way to stop these
practices," Hunt said in a Feb. 26 speech.
The SEC staff is considering one proposal that would prohibit
companies from disclosing information to select groups before or at
the same time that they issue a press release, said SEC general
counsel Harvey Goldschmid, who is heading the review. Another would
create guidelines on how long corporate insiders must wait after a
public announcement before they can begin trading, he said.
"It's clear insiders are required to wait until investors have
digested the information before they can start to trade," Goldschmid
said.
The SEC study is being conducted by the commission's enforcement,
corporation finance, and general counsel staffs, which are giving
the
issue priority because of Levitt's interest in the subject.
Any recommendations emerging from the review would have to be
crafted into a rule proposal for consideration by the commission. …

The rest of this article is only available to active members of Questia

Print this page

While we understand printed pages are helpful to our users, this limitation is necessary
to help protect our publishers' copyrighted material and prevent its unlawful distribution.
We are sorry for any inconvenience.